The Governor of the Central Bank, Michael Bonello never ceases bringing up the need for the island to ensure it does not lose its competitive edge. But, while everyone agrees with this, it does seem that not much headway is being made in this direction, with employers and the trade unions holding their ground, for instance, on a matter that affects costs. Employers would favour a review of the mechanism under which a wage increase is given across the board annually at Budget time to make up for the rise in the cost of living but the trade unions would have none of this. The government, on its part, tends to agree with the trade unions, with one minister having gone on record saying that the cost of living wage adjustment, known by its acronym COLA, has helped keep industrial stability.

Months ago, The Times called on employers, trade unions and the government to put their heads together in a bid to find a way out of the problem but while there is widespread agreement that costs should be contained no concrete measures appear to have been drawn up as yet to do something practical about it. This is why the Central Bank Governor has probably felt the need to raise the point once again.

Mr Bonello says that experience suggests that, while the incipient recovery in external demand represents an opportunity for export growth, it cannot be taken for granted. "Cost containment is a necessary condition for remaining competitive. Ensuring that production costs, particularly their predominant wage component, do not grow faster than productivity is essential at all times but more so at the current juncture when export markets are subdued and nominal wages are being frozen or cut in a number of competitor countries." He could not have been clearer than this.

It does seem sometimes that Malta carries on as if it is unaware of what is exactly happening abroad and comes into its senses only when it feels the impact. The country may not have been as hard hit as a number of other countries but the impact has been felt by practically all sectors. The government could not keep up with its financial targets and, like many other countries, it had to fund a stimulus package to bail out firms that were threatening to throw workers out of their jobs because of shrinking order books.

The country is beginning to step out of the recession, with the latest figures showing an improvement in gross domestic product. But this does not mean that the way ahead is plain sailing. Competition in both industry and tourism is bound to get keener following the recession and the fight for direct foreign investment is not getting any easier. All this, and more, brings out the absolute need for the island to ensure that, as warned by the Central Bank Governor, costs do not grow faster than productivity.

Mr Bonello is suggesting the replacement of the national wage indexation mechanism with a productivity-linked wage adjustment system at the enterprise level. Before those favouring the retention of the COLA mechanism start pouring cold water on the suggestion, it would be better if, together with the other social partners, they seriously and dispassionately consider the implications involved in retaining the status quo. A fresh look at the problem, taken with an open mind and a predisposition to consider options, could lead to better results to all.